Bajaj Finance Shares Fall Over 8% On Rating Downgrade

Shares of Bajaj Finance Ltd fell as much as 8.1 percent to an intraday low of Rs 2,120.40 apiece as brokerage firm UBS downgraded the stock's rating from "neutral" to "sell" and also cut its target price sharply from Rs 4,600 to Rs 1,600.

Bajaj Finance: Quotes, News

BSE 826.409.2 (-1.11%)

NSE 826.859.55 (-1.15%)

UBS said that there are high risks associated with the NBFC's (non-banking finance company) asset quality as it has high exposure to self-employed, two-wheeler, unsecured personal loans and SME segments.

The price target cut indicates a 30 percent possible decline from the current levels.

Earlier on 6 April, in a BSE filing, Bajaj Finance said that its customer franchise as of 31 March 2020, stood at 4.26 crore as compared to 3.45 crore as of 31 March 2019.

However, according to a Business Standard report, in a call with analysts on the same day, the company's management said that it had lost nearly 350,000 customers in previous 10 days due to COVID-19 lockdown impacting its assets under management (AUM) by Rs 4,750 crore (3.22 percent of total AUM as of 31 March).

The country's largest consumer finance company is expected to have a weak April-June quarter amid the nationwide lockdown. NBFCs were allowed to operate only on 20 April, after the lockdown was imposed on 25 March.

The two major concerns for Bajaj Finance are loan growth and asset quality deterioration.

In its key performance metrics released for the March-ended quarter the new customer addition and the new loans disbursed were the weakest since FY 2014-15, worse than the demonetisation-hit quarters. New customers acquired fell by 22.8 percent to 1.9 million, compared to the December 2019 quarter's 2.46 million. New loans booked in the March quarter fell by 22.7 percent sequentially to 6 million but was up by 3.5 percent from the same period of the previous year.